Secure 2.0 Act

The SECURE 2.0 Act builds on the original SECURE Act of 2019 with a greater mission- to encourage businesses to provide retirement plans for their employees and further motivate them to save more for their retirement futures.

Increase Required Minimum Distributions (RMD) Age

The beginning date for Required Minimum Distributions (RMDs) will be pushed from 72 to 73 years of age starting in 2023 and up again to 75 by the year 2033.

Increase Catch-Up Contributions Under a Retirement Plan or IRA

If you turn 50 in the year 2023, your maximum catch-up contributions for retirement plans is $7,500. Starting in 2025, however, those aged 60 to 63 will be able to contribute up to either $10,000 or 50% more than what would have been their contribution limit had they turned age 50 before 2024. After that date, all ages eligible for a Catch-Up Contribution will see an increase due to inflationary indexing each year until these changes are reversed. In addition, as of 2024 and onward, Individual Retirement Account (IRA) catch-up contributions are also indexed by inflation!

Expand Roth Contributions

It is now possible to designate employer contributions and employee elective deferrals as Roth when setting up SIMPLE or SEP IRAs. This means you can contribute your funds into a Roth account, allowing them to grow tax-free while also allowing you to withdraw money at any time without being taxed on those earnings!

Roth Catch-Up Contributions

If your income surpasses $145,000, catch-up contributions can be allocated to a Roth account.

Eliminate RMDs for Roth 401(k) Accounts

Beginning in 2024, you will no longer be obligated to withdraw money from your Roth 401(k) account.

529 Plan Rollovers to Roth IRAs

Beginning in 2024, those who benefit from a 529 plan may move up to $35,000 throughout their life into a Roth IRA. These rollovers will be subject to yearly contribution restrictions, and the 529 plan must be open for more than 15 years.

Expand 401(k) Automatic Enrollment

Beginning in 2025, those eligible for 401(k) and 403(b) plans will be automatically enrolled. As part of the plan, participants must contribute at least 3% of their salary; each year, contributions would steadily increase by 1% to 10%. Nonetheless, no more than 15% should ever be contributed.

Emergency Savings Account

Starting in 2024, employers can create an emergency savings account for their employees to save up to $2,500 with tax-free distributions that meet the same regulations as a Roth account. This is an incredible opportunity for workers to take advantage of and prepare themselves financially for unexpected events.

Exemption from 10% Early Distribution Penalty for Withdrawals for Certain Emergency Expenses

In times of financial strain, up to $1,000 can be taken out annually from a 401(k) or IRA without penalty. However, this sum must be repaid within three years – no further withdrawals are allowed while the debt is outstanding unless it’s fully paid off.

Modify the Saver’s Credit

To incentivize low and moderate-income earners to save for retirement, the government provides a 50% matching contribution on savings up to $2,000 ($1,000 maximum credit). This program begins in 2027 and does not require that individuals have an income tax liability.

Student-Loan Matching Program

Contributions to your employee’s student loan payments will be considered and treated as an elective deferral.

Increase Qualified Longevity Annuity Contract (QLAC) Contributions

Utilizing a qualified longevity annuity, up to $200,000 can be deposited. There is no longer any 25% income limit previously set in place.

Reduce RMD Excise Tax

For those individuals who fail to take the necessary required distributions, their excise tax has been reduced from 50% down to a rate of 25%.

Expand Qualified Charitable Distributions (QCD)

The current rules for Qualified Charitable Distributions (QCDs) are broadened to permit you to allocate a one-time payment of up to $50,000.00 through a split-interest entity such as charitable gift annuities, charitable remainder units, and charitable remainder annuity trusts. Furthermore, from 2024 onwards, the yearly QCD cap will be raised in line with inflation, which is currently set at $100,000.00 annually.

Annuities in 401(k) Plans

To streamline the use of annuities in qualified plans, let’s exempt certain features from any actuarial testing that might otherwise prevent their application.

Retirement Savings Lost and Found

The Labor Department will create a comprehensive and searchable nationwide database to help reunite people with their lost retirement plans.

Next Steps

In summary, the SECURE 2.0 Act builds on the original SECURE legislation of 2019 by incentivizing businesses to provide retirement plans and supporting employees to save more for their future retirement. In addition, this new act helps build more diversity among retirement accounts and offers greater flexibility to employers and employees. The ultimate goal is to help create a secure financial foundation for workers in all industries so that more Americans can have a better chance at experiencing a comfortable retirement. If you want to offer multiple employer plans or a better 401K plan solution, contact us today to request a free quote and learn how we can help ensure all your employees access reliable, comprehensive retirement plans.

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